Volvo dealers are hungry for the redesigned XC90

AUTOMOTIVE NEWS: Are some dealers giving up and turning in their franchises or selling?

CHIP GENGRAS: The feedback — and the press and employee feedback — on the XC90 is so positive. People are trying to hold on until that comes out. What we thought would be the last 12 months of difficult times for Volvo seems to continue. The goal line seems to be further and further away. The Volvo retailer is a resilient retailer.

What is the best thing Volvo did for dealers in 2014?

The most significant thing they did is the investment they made in the XC90.

Volvo dealers thought 2014 would be the turnaround year for sales.

But it wasn't and the struggle continues for many retailers, said Chip Gengras, chairman of the Volvo Retail Advisory Board.

Dealers are anxiously awaiting the redesigned XC90 crossover and applaud its high-tech features and new exterior design, said Gengras, owner of Gengras Motor Cars in East Hartford, Conn.

Dealers have asked Volvo for a sedan, crossover and wagon in the small-, medium- and large-vehicle segments, he said.

Gengras, 45, spoke with Staff Reporter Diana T. Kurylko.

Q. What kind of year did Volvo dealers have? We saw the numbers slide downward in a growing market.

A. Last year for Volvo retailers was a real struggle. We saw a double-digit decline in our new-vehicle volume. Our service department volume has gone down because we have fewer vehicles in operation and the availability of preowned Volvos to sell is at a very low point.

Will the redesigned XC90 due in April be competitive in the tough midsize crossover segment? Is it what you expected?

It's more than we expected. It is better looking, the interior functionality and differentiation from what is currently out there is significant, and from the first pricing, it looks like it will be very competitive.

What are the features that will sell? It has a lot of new technology. Will that differentiate the XC90 in the market?

The intuitiveness of the center stack, which is where all of the controls are, is far superior to anything on the marketplace, as is the ability to operate the car -- to do it the way the driver wants and to communicate and to be aware of traffic and safety around the car. Climate and entertainment controls are done in an intuitive way and it is very stylish.

Is this a segment in which Volvo can excel considering there are more players than when the first XC90 came out 13 years ago?

The dealers are counting on it.

Why are the new engines important? How does a dealer sell a four-cylinder in the U.S.? Those are the only powerplants future Volvos will have.

The conversation has moved for Volvo and others from cylinders to horsepower. The horsepower and the torque in Volvo cars is competitive in the segment. The added benefit is that fuel economy will be class-leading. Even though gas prices are going down, it is still relevant to consumers because prices won't stay down. It speaks to Volvo's overall care of the environment, they want to protect inside and out. We have the Drive-E fuel-efficient and powerful engines now in the V60 and the front-wheel-drive S60. The expectation is the driver is very pleased with both how the vehicle looks and its performance.

What kind of product cadence will you have as vehicles are replaced, and will the redesigns come quick enough?

I would say from the retailer's perspective not quick enough. We have been relying on too few products to sell. This year, we have the S60, XC60, V60 and the V60 Cross Country. The Cross Country will do well but it is relatively small volume. We have the XC90 coming and the following year the S80 large-car replacement and a wagon replacement.

We would like to have at a minimum a sedan, a crossover and an SUV in three segments -- in the small, middle and large segments.

How long will that take?

I do not have that. I believe the next cars coming will be the large sedan and the large wagon. I don't know if that's been confirmed.

Will the replacement for the S80 -- the S90 -- be different enough to really compete with other premium sedans?

The XC90 segment is really cutthroat. If their future cars can have the design elements of the XC90, the retailers expect it will be relevant and we can start getting back the market share that retailers desperately need.

How has the V60 wagon that was launched last January been received?

It has been good. Volvo did not spend a lot of money to launch the car. The traffic has been a little light but the people who have purchased the car have enjoyed it, for sure.

"Volvo" and "station wagons" were once synonymous. Does Volvo need to add more wagons and, more important, can you sell them?

Other manufacturers like Subaru have shown that wagons are still relevant. Most manufacturers have shown you can have a sedan, a crossover and wagon in three core segments, if you look at the competitors that Volvo looks at: Audi, BMW and Mercedes-Benz. The retailers would also look downmarket to Volkswagen, Honda and Toyota and Subaru. The versatility of a wagon and a fifth door is an important segment, and Volvo needs to be there.

Will it?

The retailers hope so. They need to and they have to be, our traffic and volume at current levels is not sustainable. We need this brand to have more product so we can get back to 1 percent market share in the United States.

What about a convertible? Does Volvo need this as a halo? The old one went away more than a year ago.

We cannot afford a halo. We need products we can sell to the majority of the market.

When is a plug-in electric coming?

The XC90 will be dual power -- plug-in electric and a four-cylinder engine. That will resonate with our customers for sure.

Volvo has tried many things with marketing in the past several years. How is its new approach about going back to its roots working and what is the dealer reaction?

Dealer reaction is we are pleased they are going back to their roots. It has taken way too long and it will take a long time to regain what we lost.

Is the new marketing resonating with consumers and would-be buyers?

The ads and the marketing and the way they are showcasing the product is what is at Volvo's core -- the people in the car, both active and passive safety and the environment. It is resonating more than the last four to five years. It will take a high volume of that message to get back and to get us on the shopping list of the American consumer.

Is Volvo's spending low compared to the competition?

Sure. Absolutely.

Is Volvo committed to spending considerably more or does that depend on increased sales?

Yes and yes. Volvo is putting more into the United States marketplace than they have in the past and the retailers would say you need even more.

Volvo delayed its performance margin program because of low throughput. Is a new program being discussed with a bonus and a facilities program?

They talked about a margin program, they have not dramatically changed it yet. They are talking about doing it. The retailers' position is -- and it's a firm one -- that at the current state there is very little reason to put any margin at risk for a Volvo retailer.

What's the earliest you'll see a change?

I cannot speak to when it will come up. But from the retailers' perspective, when Volvo regains its fair share of market that is a reasonable time to talk about a variable margin.

So from the dealer perspective the rollback was wise?

Yes, absolutely.

Have you discussed when a coupe will return to the lineup?

I do not think that is a high-volume car, and Volvo needs high-volume cars. Volvo needs to be relevant in high volume segments.

What do you hope to accomplish as chairman of the dealer council?

This will be my second NADA. The advisory board has three core objectives.

1. To improve throughput and profitability. We have not done that.

2. To improve the brand consideration and make sure that it speaks to the core values. We have started to do that.

3. To make sure that the U.S. has the product to support the retail network. You can't fast track a product plan. We have not done that. I do not know how much we can attack that. It feels like we haven't accomplished an awful lot.

Do dealers have confidence in the new management that was appointed last year?

I think the team at Volvo Cars of North America has never been stronger and the attention from Sweden in the U.S. has never been stronger.

The retailers would say the support needs to grow. You have to support us and spend much more than the competition with marketing. If you have limited models to sell waiting for the new ones to come out, we need to be really aggressive because that is where the volume will come to sustain the network. Sweden almost can't invest enough in the U.S.

Are the majority of Volvo dealers profitable and making money on used cars and the back end?

I do not have the latest. Certainly not all. Dealer profitability is challenge No. 1. I can't tell you what percentage. It is not a strong majority. I would guess it is in the 60 to 70 percent range

Are they making money on new-car sales?

It varies by region. It is a struggle.

How can the factory help increase revenues on the service side?

It is pretty hard for the manufacturer to help the service business unless free service is included in the purchase of the car. They have some limited offerings but we do not have the free factory scheduled maintenance we had in the past.

Is Volvo considering bringing free maintenance back?

It is important for the strength of the network. It is important for the dealer in the service department for retention in the certified and preowned market.

What has been presented to the advisory board is you can't do everything -- it is something you have to sacrifice for a larger marketing spend.

You've had your own captive finance arm for how long? Are its programs helping?

Over a year. It works terrific. The relationship with Volvo Car Finance has been good. There has been pressure on Volvo's 360, which is the repurchase program and that has been a challenge on some of the products.

They have a portfolio and the retailers are expected to buy a percentage of what comes back. It has been a struggle because the residual value has been lower than expected. When you are at low volumes, it is more impactful.

How about the certified preowned program, are you making a profit?

It is an opportunity. Not every retailer is in the CPO business like they were in the past in the early 2000s. It is an opportunity for VCNA and the retailers going forward.

Are prices falling?

The availability of cars is small so prices are relatively high.

Is the facilities program still on hold?

Volvo would like all of its retailers to have a consistent facility look. I would say that the majority of retailers are not in the position to make that investment at this point.